- 31

return" to copyright owners for their creations.*/

Wilbur

D. Campbell, Deputy Director of the GAO, has accurately noted that "the current appeals of [four of the five] key Tribunal decisions attest to the vagueness of the legislated criteria since each of the appeals challenges the very basis of the Tribunal's decisions.".

**

exception.***

In the meantime, as the appeals process drags on, millions of dollars in copyright royalties remain undistributed. The problems caused by the CRT's failure to make timely distributions are enormous, according to former CRT Chairman James.James said that payment to copyright owners ideally should be made within a year after the royalties are paid into the government fund, yet disputes which drag on for four to five years can be expected to become the rule rather than the Pending the disposition of appeals and eventual distribution to copyright owners, over $41.6 million in cable funds remain on deposit with the Treasury Department from 1978, 1979, and 1980 cable royalty payments. According to Chairman James's estimates, the appeal on the 1978 funds "may be" concluded in 1983, barring a remand of the proceedings to the CRT and any subsequent appeals. Similarly, nearly $2.2 million in 1979 and 1980 jukebox royalty funds remained undistributed. A total

*/ 17 U.S.C. $801(b).

Campbell at 81.

James at 56-57.

undistributed royalty fund of over $100 million is not an unreasonable estimate for the near future, in James' view, "because of the existing appeals, and the possibility of future appeals on each and every distribution proceeding held by the Tribunal.".

Even if Congress had set out clearer standards for CRT decisions, the agency would not be able to handle complex rate review and distribution matters. Several basic organizational flaws impede the CRT's ability to reach prompt, supportable decisions.**/ For example, although the CRT's decisions have

a direct financial effect on groups affected by compulsory licenses, the CRT receives only such evidence as the parties before it choose to submit because it lacks subpoena power. In addition, the Tribunal has no general counsel, although its duties require it to deal with complex legal issues involving contracts law, the First Amendment, and the Administrative Procedure Act, as well as copyright law. Indeed, only two of the five original commissioners were lawyers, and only one had any significant familiarity with copyright law before his appointment. Similarly, although economic analysis is critical in determining appropriate royalty rates and distribution, the CRT retains no economic consultants. Due in part to its lack of expertise and its inability to compel the production of

*/ James at 57.

** */ Campbell at 94-102.

relevant evidence, CRT proceedings have crept at a snail's pace.*/

Under the current system, copyright owners "are effectively being denied their just rewards

the proceeds

In fact, copyright

holders are footing part of the bill for the CRT's inefficiencies, since the costs of the CRT's royalty distribution procedures

a total of over a half-million dollars in 1978

are deducted

The CRT has obviously failed to discharge its responsibilities for royalty determination and distribution under the existing compulsory license provisions. Giving the CRT new responsibilities for royalties for home video taping of copyrighted materials would only compound the present administrative nightmare. For example, there are no easy guidelines or CRT precedents to help it establish video royalty rates. In other proceedings the CRT has been able to look to broadcast logs, record sales, or jukebox revenues for some objective starting point for determining the use made of copyrighted works covered by compulsory licensing. There is no similar basis in

the VCR area for determining the extent of home video recording of copyrighted works.

The CRT would also have to grapple with the difficult question of how to reflect the use of VCRs for "time-shifting" purposes in its rate determinations. These decisions could

require the CRT to study VCR users' actual recording behavior, with the attendant expense and difficulty of conducting such studies and a danger of privacy intrusion from monitoring home viewing.

The obvious conclusion, given the complexity and character of the decisions that have to be made about compensation for video taping, is that the CRT is not the right place to make them. They are better left to the competitive marketplace of copyright owners and broadcasters which has the incentive, responsiveness, and sensitivity to set compensation levels that accurately reflect the value of video taping copyrighted material.

V. COMPENSATION FOR USE OF COPYRIGHTED MATERIALS

A.

Broadcast Licensing

Some holders of copyrights on programs and films broadcast on television claim that any copyright exemption for home video recording would "strip from authors and creators the rights to their property without just compensation. argument completely ignores the highly competitive marketplace

This

*/ Hearings on S. 1758 Before the Senate Judiciary Committee, November 30, 1981 (testimony of Sid Sheinberg, President and Chief Operating Officer, MCA, Inc. at 2). MCA is the parent company of Universal City Studios, Inc., plaintiff in the Sony and RCA cases.

35

in which television broadcasters and copyright holders who create programming negotiate broadcast license fees. There is no reason to create a cumbersome, intrusive, and inefficient government system for the same purpose, given the existence of this efficient and flourishing free market mechanism through which copyright holders can promptly and directly receive fair compensation. Even Jack Valenti, president of the Motion Picture Association of America, recognizes that the best way to determine the fair value of copyrighted properties is through direct negotiations between copyright holders and exhibitors, as evidenced by his challenge to cable operators covered by compulsory licenses to "go in and bargain like your competitors.

"

1. Audience measurement techniques

A barrage of contradictory claims has beclouded

the basically clear-cut question of the extent to which VCR use is and can be reflected by the Nielsen and Arbitron television audience rating services. Both systems of audience measurement currently in use, television meters (Nielsen) and diaries

(Nielsen and Arbitron), are clearly capable of obtaining

"Meet casts doubts on direct broadcast," Advertising Age, October 12, 1981.

See, e.g., Universal City Studios, Inc. v. Sony Corporation of America, 480 F. Supp. 429, 441 (C.D.Cal. 1979).